How to budget for health insurance
Written by Katie Carpenter
Dec 9, 2013 2:41 PM
Budgeting for health care expenses is personal and it depends on your family size, unique health needs, lifestyle and priorities.
The first step if to calculate your net income. Then, explore these two models of budgeting to help you figure out how much you can pay for health insurance (via WebMD).
Model 1: Use a set percentage for health costs.
- The cost of your insurance premiums, deductibles, co-insurance, and co-payments should be about 4% to 6% of your monthly net income after taxes.
- The cost of prescription drugs, eye care, and dental care should be about 2% to 8% of your total monthly net income after taxes.
Add these amounts to the other expenses you have, such as your house payment, utilities, and transportation to see how the distribution works.
Model 2: Divide your income into a pie.
Another method for figuring out how much to set aside is to follow the 50/30/20 budget.
- Your needs equal no more than 50% of your after-tax income. Your needs include things like mortgage payments, utilities, food, transportation, and health insurance costs.
- Your savings equal no more than 20% of your after-tax income. This goes to savings, retirement, or your emergency fund.
- Your wants equal no more than 30% of your after-tax salary. Wants include cable TV, dining out, and vacations.